Saving for the bad times: slack resources during an economic downturn

Abstract

Purpose This paper aims to examine what firms in Spanish industrial sectors redeployed their resources, depending on their organisational slack (resource excess), when faced with the global economic crisis of 2008. Design/methodology/approach Various financial measures for slack resources and performance have been analysed from more than 400 Spanish firms from 2006 (pre-crisis) to 2017 (recovery). Findings The first finding is that every slack is useful against an economic downturn. The results show how industrial companies use their slack resources when faced with a generalised crisis according to the level of slack possessed. The key role of the available slack against this environmental threatens is remarked. Research limitations/implications Not every resource is useful against an economic downturn. The results show how industrial companies use their slack resources when faced with a generalised crisis in accordance with the types and levels of slack. The key role of the liquid resources, in particular cash, against this environmental threat is discussed. However, we also observe the behaviour of firms with only a few excess resources and find very similar resource consumption patterns. Originality/value Although organisational slack is a well-known concept in management, few studies deal with how companies consume or use other types of resources when confronting a crisis. This paper not only addresses this question but also offers insights for a detailed evaluation of various types of slack during and after a crisis.